On 25 October 2011 the Commission adopted a legislative proposal (see IP/11/1238 and MEMO/11/734) requiring the disclosure of payments to governments on a country and project basis by listed and large1 non-listed companies with activities in the extractive industry (oil, gas and mining) and loggers of primary forests (the so-called country by country reporting - CBCR).The European Commission proposal followed guidelines developed by the Extractive Industry Transparency Initiative (EITI) but once adopted by the European Parliament and Council these requirements will be put into European law, thereby making them binding. This puts the EU on a level playing field with the US which also adopted disclosure requirements in July 2010 (Section 1504 of the Dodd-Frank Act).

The Commission has publicly expressed support for the Extractive Industry Transparency Initiative (EITI), and envisaged willingness to present legislation mandating disclosure requirements for extractive industry companies. A similar pledge was made in the concluding Declaration of the G8 Summit in Deauville of May 2011, where the G8 governments committed "to setting in place transparency laws and regulations or to promoting voluntary standards that require or encourage oil, gas, and mining companies to disclose the payments they make to governments.

This disclosure requirement has been incorporated in the proposals to revise the Accounting Directives (78/660/EEC and 83/349/EEC) and the Transparency Directive (2004/109/EC). The existing Accounting Directive regulates the information provided in the financial statements of all limited liability companies which are registered in the European Economic Area (EEA). The same disclosure requirement has been incorporated in the proposal to revise the Transparency Directive in order to include all companies which are listed on EU regulated markets even if they are not registered in the EEA and incorporated in a third country. With today's agreement, negotiations on the Transparency Directive can now be concluded swiftly.

The new agreement establishes rules ensuring that these companies disclose payments to governments (e.g. taxes on profits, royalties, and licence fees) on a country and project basis. Reporting would also be carried out on a project basis, where payments have been attributed to specific projects. The text requires the Commission to review the possibility of extending the disclosure requirements to other sectors.

At the same time, the Commission proposed reducing the administrative burden for small companies. This key initiative is part of the Single Market Act (SMA) of 13 April 2011, in which the Commission set out twelve levers to re-launch the Single Market for 2012 for sustainable, smart and inclusive growth (see IP/11/469). Two of the key actions identified were the creation and development of small and micro enterprises, by introducing smart regulation and cutting red tape and the creation of an eco-system conducive to the development of social entrepreneurship. This Directive will create a safer harbour in which small companies will be protected against obligations to produce onerous information in their financial statements. Such protection will mainly be relevant to the notes and statements to be prepared. Simplification will vary between small companies depending on their size and on the jurisdiction in which they are located.